A break in the circuit

Sara Yirrell: Credit insurers are going to be taking a look at the industry

The US is reeling from the shock announcement by electronics retail giant Circuit City that it is entering into Chapter 11.

This is the single biggest electronics retailer in the US to file for bankruptcy protection since the start of the global economic crisis. It has more than 700 outlets and employs 40,000 staff. According to reports, the retailer had lost ground to rivals Best Buy and Walmart over recent years, suffering losses in the past six quarters.

As we all know, what happens in the US usually has a ripple effect in the UK in some form or another.
Obviously, we have no way of knowing how Circuit City runs its business, but the move has sent shockwaves through both the vendor and the credit insurer community. This is the frightening part.

CRN understands that some of the vendors that could take multimillion-dollar hits include Sony, HP and Samsung. Inevitably at least one of these will fall back to the credit insurers.

With such eye-watering sums involved, credit insurers will be taking a good hard look at the industry once more and seeing where they can reduce their own risk, leaving more players exposed at a very dangerous time.

Unfortunately, as more IT heavyweights join the “tough 2009” mantra, nerves are going to be even more frayed and reactions very swift. However, this may not always be in the best interests of the wider industry. Worrying times indeed.

Sara Yirrell is editor of CRN ­ sara.yirrell@incisivemedia.com